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ICSID Case No ARB/10/5
TIDEWATER INC. TIDEWATER INVESTMENT SRL TIDEWATER CARIBE, C.A.
TWENTY GRAND OFFSHORE, L.L.C. POINT MARINE, L.L.C.
TWENTY GRAND MARINE SERVICE, L.L.C. JACKSON MARINE, L.L.C.
ZAPATA GULF MARINE OPERATORS, L.L.C.
Claimants
and
THE BOLIVARIAN REPUBLIC OF VENEZUELA
Respondent
_____________________________________________
DECISION ON CLAIMANTS’ PROPOSAL TO DISQUALIFY PROFESSOR BRIGITTE STERN, ARBITRATOR
_____________________________________________
issued by
Professor Campbell McLachlan QC, President Dr Andrés Rigo Sureda, Arbitrator
Secretary of the Tribunal
Mr Marco Tulio Montañés‐Rumayor
Representing Tidewater Mr Bruce Lundstrom Tidewater Inc 2000 West Sam Houston Parkway South Suite 1280 Houston, Texas 77042 Mr Oscar M. Garibaldi Mr Miguel López Forastier Mr Joshua B. Simmons Covington & Burling LLP 1201 Pennsylvania Avenue, NW Washington, D.C. 20004‐2401 UNITED STATES OF AMERICA Date: December 23, 2010
Representing VenezuelaDra. Gladys María Gutiérrez Alvarado Procuradora General de la República Av. Los Ilustres, cruce con calle Francisco lazo Martí. Edificio Procuraduría General de la República. Piso 8. Urb. Santa Mónica. Caracas 1040, VENEZUELA Mr George Kahale III Curtis, Mallet‐Prevost, Colt & Mosle LLP 101 Park Avenue New York, NY 10178 UNITED STATES OF AMERICA
2
CONTENTS
I. Introduction [1]
A Request for Arbitration and Constitution of the Tribunal [1] B Professor Stern’s Declaration [6] C Tidewater’s Proposal to Disqualify Professor Stern
[9]
II. The Parties’ Submissions
[13]
A Tidewater [13] B Venezuela
[22]
III. Professor Stern’s Explanation
[25]
IV. Analysis of the Two Members
[30]
A Applicable law [32] 1 Applicable legal standards [33] 2 Relationship between disclosure and independence [38] 3 Relevance of the IBA Guidelines
[41]
B Non‐disclosure of other ICSID arbitral appointments by the same party [45] C Multiple arbitral appointments [58] D Possibility of decision on related legal issues
[65]
V. Decision
[73]
I. Introduction
A. Request for Arbitration and Constitution of the Tribunal
1. On February 16, 2010, Tidewater Inc, Tidewater Investment SRL, Tidewater Caribe, C.A.,
Twenty Grand Offshore, L.L.C., Point Marine, L.L.C., Twenty Grand Marine Service, L.L.C.,
Jackson Marine, L.L.C. and Zapata Gulf Marine Operators, L.L.C. (together ‘Tidewater’)
filed a Request for Arbitration under the ICSID Convention against the Bolivarian
Republic of Venezuela (‘Venezuela’).
2. On March 5, 2010, the Secretary‐General of ICSID registered the Request for Arbitration
pursuant to Article 36(3) of the ICSID Convention.
3. On March 9, 2010, Tidewater proposed a method for appointment of the Tribunal by
agreement with Venezuela pursuant to ICSID Arbitration Rule 2(1). On June 25, 2010, in
the absence of agreement and pursuant to Rule 2(3), Tidewater invoked the
appointment procedure provided in Article 37(2)(b) of the ICSID Convention. It
appointed Dr Andrés Rigo Sureda, a national of Spain, as arbitrator. On July 13, 2010,
the Secretariat informed the parties that Dr Rigo Sureda had accepted his appointment
3
and circulated a copy of his signed declaration. On July 14, 2010, Venezuela appointed
Professor Brigitte Stern, a national of France, as arbitrator. On August 4, 2010, the
Secretariat informed the parties that Professor Stern had accepted her appointment and
circulated a copy of her signed declaration.
4. In the same letter of August 4, 2010, the Secretary‐General invited the parties to agree
on a President of the Tribunal. As no agreement was reached, on August 12, 2010, the
Secretary‐General informed the parties that she intended to propose to the Chairman of
the Administrative Council that he appoint Professor Campbell McLachlan QC, a national
of New Zealand, as President of the Tribunal, pursuant to Article 38 of the ICSID
Convention and ICSID Arbitration Rule 4 as invoked by Claimants. On August 19 and 20,
2010 respectively, each of Tidewater and Venezuela informed the Secretary‐General
that they had no objection to the appointment of Professor McLachlan. Accordingly, on
August 23, 2010, the Secretariat informed the parties that the Chairman had proceeded
with his appointment.
5. The parties were informed on August 31, 2010 that all three arbitrators had accepted
their appointments and that therefore, pursuant to ICSID Arbitration Rule 6, the Arbitral
Tribunal was deemed to have been constituted, and the proceeding to have begun, as of
that date.
B. Professor Stern’s Declaration
6. In her declaration signed on July 30, 2010, (and forwarded to the parties first on August
4, 2010 and again on August 31, 2010) Professor Stern had crossed out by hand the first
sentence of the fourth paragraph of the form prescribed by ICSID Arbitration Rule 6(2),
so that the text read:
To the best of my knowledge there is no reason why I should not serve on the Arbitral
Tribunal constituted with respect to a dispute between Tidewater Inc. and others v.
Bolivarian Republic of Venezuela (ICSID Case No. ARB/10/5)
I shall keep confidential all information coming to my knowledge as a result of my
participation in this proceeding, as well as the contents of any award made by the
Tribunal.
I shall judge fairly as between the parties, according to the applicable law, and shall
not accept any instruction or compensation with regard to the proceeding from any
4
source except as provided in the Administrative and Financial Regulations of the
Centre.
Attached is a statement of (a) my past and present professional business and other
relationships (if any) with the parties and (b) any other circumstances that might
cause my reliability for independent judgment to be questioned by a party. I
acknowledge that by signing this declaration, I assume a continuing obligation
promptly to notify the Secretary‐General of the Centre of any such relationship or
circumstance that subsequently arises during this proceeding.
7. On September 10, 2010, Tidewater made a request to the Secretary of the Tribunal that
Professor Stern be asked to provide a complete declaration in accordance with ICSID
Arbitration Rule 6(2), since, in Tidewater’s submission, that Rule does not contemplate
deletions or alternative texts.
8. On September 13, 2010 (the next business day), Professor Stern filed a revised
declaration in the prescribed form, without deletion or amendment. In an
accompanying document, she gave the following explanation for her original deletion of
these two sentences:
First, I consider that there is no circumstance that could cause my reliability for
independent judgment, which explains that I deleted the (b) in order to indicate that I
will not attach a document containing such information, as there was none.
Moreover, I deleted also (a), as I always thought that there was a necessity to
disclose only unknown facts, not facts in the public domain, that can be seen by
anyone on the ICSID webpage.
However, as the Claimant so requests, I confirm what is on the ICSID webpage. I have
been nominated by Venezuela in two other cases, in the last 6 years, for which the
Tribunal is constituted:
Vannessa Ventures Ltd. v. Bolivarian Republic of Venezuela (ICSID Case No.
ARB(AF)/04/6), in the year 2004.1
Brandes Investment Partners LP v. The Bolivarian Republic of Venezuela, ICSID Case
No. ARB/08/3, in the year 2008.2
1 ‘Vannessa’.
2 ‘Brandes’.
5
Also, I have accepted a nomination in a new case, this year, for which the tribunal is
not yet constituted, as the president has not been designated:
Universal Compression International Holdings, S.L.U. v. Bolivarian Republic of
Venezuela (ICSID Case No. ARB/10/9).
I hope this clarifies the matter. I enclose a declaration with the two sentences not
deleted, although the second one should probably be.
C. Tidewater’s Proposal to Disqualify Professor Stern
9. On September 28, 2010, Tidewater proposed the disqualification of Professor Stern
upon the ground that her multiple appointments by the same party and the same
counsel, not disclosed in her original declaration, give rise to objective and justifiable
doubts regarding her independence and impartiality.
10. On October 4, 2010, the President of the Tribunal, after consulting with the other
arbitrator, fixed the following time limits: October 15, 2010, for Venezuela to file a reply;
October 27, 2010, for Professor Stern to file her explanations; and November 3, 2010,
for the parties to file further observations including comments arising from Professor
Stern’s explanations.
11. Each of the parties and Professor Stern filed their comments within the time limits fixed
by the President.
12. Article 58 of the ICSID Convention provides that the decision on any proposal to
disqualify an arbitrator shall be taken by the other members of the Tribunal (save where
they are equally divided, in which event the decision is to be taken by the Chairman of
the Administrative Council). The two other members of this Tribunal, Professor
Campbell McLachlan QC (President) and Dr Andrés Rigo Sureda (Arbitrator), (together
‘the Two Members’) have deliberated by various means of communication, and have
reached an agreed Decision on the Proposal. The submissions of the parties, the reasons
of the Two Members, and their Decision are set out herein.
6
II. The Parties’ Submissions
A. Tidewater
13. Tidewater argues that ICSID Arbitration Rule 6(2) and the IBA Guidelines on Conflicts in
International Arbitration (‘IBA Guidelines’) require an objective standard to be applied
in determining whether disclosure is required. It submits that Professor Stern had been
appointed by the same party double the number of times that would give justifiable
doubts according to Section 3.1.3 of the Orange List of the IBA Guidelines.3 Tidewater
further argues that multiple appointments by the same party create a potential for
undue influence or at least the appearance of undue influence and for an unfair
advantage for the appointing party. As explained by Tidewater, the arbitrator may hear
the appointing party’s position multiple times while the opposing party has only one
opportunity and it may be too late by then for the opposing party to persuade the
arbitrator in question.
14. Additionally Tidewater observes that Professor Stern has been appointed three times by
the same law firm, Curtis, Mallet‐Prevost, Colt & Mosle LLP (‘Curtis’), and four by
Venezuela’s Attorney General, Dra. Gladys María Gutiérrez Alvarado. This, Tidewater
submits, also gives rise to justifiable doubts as to Professor Stern’s impartiality, being the
scenario contemplated in Section 3.3.7 of the Orange List.4 Tidewater submits that, in
the ICS Inspection case, the Appointing Authority ruled that, when the relevant facts are
reflected in more than one scenario on the Orange List of the IBA Guidelines, ‘the
conflict in question is sufficiently serious to give rise to objectively justifiable doubts as to
[an arbitrator’s] impartiality and independence’.5
15. Tidewater further submits that an arbitrator may be disqualified even if that arbitrator
has the personal intention to act impartially and independently. For this purpose, the
level of experience and standing of an arbitrator are not relevant to the determination
of ‘justifiable doubts.’
16. Tidewater argues that the objective doubts about Professor Stern’s independence and
impartiality have been compounded by her failure to disclose the multiple appointments
3 IBA Guidelines (May 22, 2004), Section 3.1.3: ‘The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties’. 4 Section 3.3.7: ‘The arbitrator has within the past three years received more than three appointments by the same counsel or the same law firm.’ 5 ICS Inspection and Control Services Ltd v Argentina (Decision on Challenge to Arbitrator, UNCITRAL, December 17, 2009) IIC 406 (2009), [2].
7
in her first statement and the fact that not all the circumstances related to these
appointments are publicly known. Tidewater notes that the ICSID website does not
disclose which party appointed each co‐arbitrator and Professor Stern’s appointment in
Universal Compression did not show on that website at the time that the declaration
was made because the tribunal was not then yet constituted. In any case, Tidewater
observes that, where there is an objective cause for doubt, arbitrators are obliged to err
on the side of disclosure.
17. Tidewater observes that, although the IBA Guidelines were originally developed for
international commercial arbitration, their Introduction states that they should ‘equally
apply to other types of arbitration, such as investment arbitrations (insofar as these may
not be considered as commercial arbitrations).’6 Tidewater further observes that
investment arbitration tribunals have turned routinely to the IBA Guidelines as
persuasive authority in resolving challenges to arbitrators. As to the duty of disclosure,
Tidewater notes that ICSID Arbitration Rule 6 does not have any exception in respect of
the duty to disclose publicly available information. This is necessarily so, since otherwise,
submits Tidewater, the parties would need to conduct intrusive investigations and rely
on indirect and not always reliable sources. Arbitrators will always be in ‘the best
position to gather, evaluate, and disclose accurate information relevant to their potential
conflicts’.7
18. Tidewater draws attention to a new fact pattern resulting from the information filed
with Venezuela’s Reply which it submits falls under Section 3.1.58 of the IBA Guidelines
on cases involving related issues. According to Tidewater, the Brandes case9 raises a
dispositive issue identical to an issue raised in this proceeding, namely the question
whether the Venezuelan Law on the Promotion and Protection of Investments expresses
a basis for Venezuela’s consent to ICSID arbitration.10 Tidewater contends that, unless
Venezuela gives an assurance that it will not contest jurisdiction on that basis in the
present case, Professor Stern will need to rule on this issue in Brandes before the issue is
reached in Tidewater. It submits that this will amount to prejudging the identical issue
6 Supra n 3, Introduction, [5]. 7 Tidewater’s Further Observations, November 3, 2010, 5. 8 Section 3.1.5: ‘The arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties or an affiliate of one of the parties.’ 9 Supra n 2. 10 Tidewater relies for this purpose on a news report from Latin Lawyer dated September 11, 2009 at Ex R‐6, 2, which states, inter alia: ‘As no BIT exists between Venezuela and the US, Brandes is relying on Venezuela’s foreign investment law, which refers to ICSID arbitration.’
8
presented in the present case without Tidewater having an opportunity to argue the
issue before Professor Stern has made up her mind.
19. On the question of multiple appointments by Venezuela, Tidewater disputes whether
Vanessa should be excluded because the appointment of Professor Stern to this Tribunal
was made three years and three weeks after the appointment to the Vanessa tribunal.
Tidewater submits that, if Professor Stern’s explanation in respect of her appointment to
the Universal Compression tribunal to the effect that an offer to appoint is only
perfected when accepted and the tribunal constituted is applied to Vanessa, the
appointment in the latter case falls within the three years stipulated in the IBA
Guidelines.
20. In any case, argues Tidewater, a strict three‐year time line would give the parties an
incentive to adopt dilatory tactics to avoid Section 3.1.3, and the IBA Guidelines
explicitly warn against a formalistic approach to their application. Tidewater also argues
against excluding the Universal Compression appointment since later appointments
create the risk that an arbitrator’s judgment be skewed in favour of the appointing party
as much as earlier appointments.
21. Tidewater observes that the freedom of States to choose their arbitrator is not absolute
but limited by Articles 14(1) and 57 of the Convention, Arbitration Rule 6(2) and the
persuasive force of the IBA Guidelines. It submits that States should not have greater
leeway than claimants in making serial appointments which would be contrary to the
principle of equality of arms between a claimant and a State.
B. Venezuela
22. Venezuela contests the disqualification proposal on the grounds that it is based on the
wrong facts and the wrong law. Venezuela argues that the information not revealed by
Professor Stern is publicly known:
(a) At the time she signed her first declaration on July 30, 2010, her appointments in
Vanessa and Brandes were available on the ICSID website, and the decision on
jurisdiction in the case of Vanessa was also in the public domain;
(b) Her appointment in the case of Universal Compression took place in August 2010;
9
(c) She confirmed in her second declaration on September 13, 2010 the available public
information in the cases of Vanessa and Brandes, and added her recent
appointment in Universal Compression;
(d) It was equally public that Curtis represented Venezuela in the cases of Brandes and
Universal Compression; and,
(e) Curtis has confirmed that Professor Stern has not been appointed as arbitrator in any
other proceeding by a client of that firm.
23. Venezuela argues that the facts and legal arguments of Tidewater in respect of the IBA
Guidelines are also incorrect:
(a) Professor Stern fulfilled the requirement of ICSID Arbitration Rule 6 by making her
declaration before the first session of the Tribunal;
(b) The IBA Guidelines are applicable to commercial arbitration where the need to
reveal appointments by the parties is greater because such information is not
publicly available;
(c) At the time of Professor Stern’s appointment to the Tidewater tribunal, she had been
appointed by Venezuela only in one case, Brandes, within the three preceding years
of Section 3.1.3 of the IBA Guidelines. She was appointed in Vanessa in June 2007;
(d) Section 3.3.7 of the IBA Guidelines is not applicable because Curtis does not act as
counsel in more than three cases, and the attempt to include within the scope of
this section appointments made by the Attorney General should fail since the
Attorney General by law represents Venezuela in all of its cases. In any case, the
appointment in Vanessa is older than the three years specified in Section 3.1.3; and
(e) The ICS precedent is irrelevant because in the instant case the factual circumstances
for two Orange List cases do not exist.
24. Venezuela notes that the argument that multiple appointments may give an arbitrator a
potential advantage in respect of co‐arbitrators has been rejected in three instances.11
Venezuela concludes by pleading that the other members of the Tribunal reject the
disqualification proposal and award the related costs to Venezuela.
11 Participaciones Inversiones Portuarias Sàrl v Gabonese Republic (Decision on Proposal for Disqualification of an Arbitrator) ICSID Case No ARB/08/17 (November 12, 2009); Saba Fakes v Turkey (Decision on Disqualification of Arbitrator) ICSID Case No ARB/07/20 (April 28, 2008); Electrabel SA v Hungary (Decision on Disqualification of Arbitrator) ICSID Case No ARB/07/19 (February 25, 2008).
10
III. Professor Stern’s Explanation
25. In her Explanation of October 25, 2010,12 Professor Stern states that she believes that
she has always complied with the duty of an arbitrator to be independent and impartial
in the numerous arbitrations in which she has been a member of the tribunal and will
continue to act independently and impartially in all the arbitral tribunals in which she
may be called to serve.
26. In respect of the argument that, by being appointed multiple times by the same party
she may be unduly influenced by hearing the same argument repeatedly, Professor
Stern explains that she is not convinced by the number of times she hears an argument
but by the intrinsic value of the argument. She points out that she knows nothing about
the Tidewater or Universal Compression cases and whether there will be positions
pleaded several times. In the other two cases with the same respondent –Vanessa and
Brandes – where she has participated in preliminary decisions, the issues raised were
quite different.
27. She adds that the number of States and of most experienced arbitrators is limited. If a
State cannot nominate the same arbitrator in several cases, it ‘would undermine the
freedom of States to choose their arbitrator’.13
28. As to multiple appointments by the same counsel, Professor Stern points out that she
has been appointed three or more times by several law firms and does not consider this
fact a professional business relationship which could endanger her independence.
Professor Stern explains that she has been an academic with ‘a tradition of full
independence and no business relations with any specific law firm’14 during the length of
her career. She clarifies that in the case of Vanessa she was actually nominated by
another law firm, Foley Hoag LLP, and not by Curtis.15
29. Professor Stern explains that, in her view, her duty to disclose is limited to facts that are
undisclosed or unknown. She explains that this has been her practice in other ICSID
12 As supplemented by Professor Stern’s Clarification of November 7, 2010. 13 Professor Stern’s Explanation, October 25, 2010, 2. 14 Ibid, 3. 15 Professor Stern had originally stated in her Explanation of October 25, 2010 that Curtis had been instructed in Vannessa at a later stage. But she subsequently corrected this statement in her Clarification of November 7, 2010 in which she stated that, on checking her file in that matter, counsel signing the most recent pleading for Venezuela were Foley Hoag and Arnold & Porter with no involvement by Curtis.
11
cases where she has been appointed multiple times by the same party and the practice
of other tribunal members. Professor Stern affirms that the parties’ lawyers in those
cases did not consider that this disclosure practice could raise reasonable doubts
regarding her independence or impartiality. She adds that, since she signed her
declaration in July, she has been appointed in the case of Universal Compression as she
informed the Secretary‐General in September 2010.
IV. Analysis of the Two Members
30. Tidewater’s Proposal raises three interrelated issues as to potential grounds for the
disqualification of Professor Stern:
(a) What is the effect of Professor Stern’s alleged failure initially to disclose her
appointments by Venezuela as arbitrator in three other ICSID cases?
(b) Does the holding of those three other arbitral appointments itself indicate a
manifest lack of the qualities required to serve as an arbitrator in this case?
(c) Is the answer to (b) affected by the fact that Professor Stern may be required, as a
member of an arbitral tribunal in another case also involving Venezuela, to decide
certain issues of law which may overlap with issues of law she may be called upon to
decide in the present case?
31. The Two Members propose to deal with each of these questions in turn. But first it is
necessary to set forth the legal standards applicable generally to the disqualification of
an arbitrator under the ICSID Convention.
A. Applicable law
32. This part of the Decision deals with:
(a) The applicable legal standards;
(b) The relationship between the duty of disclosure and the requirement of
independence; and
(c) The relevance of the IBA Guidelines.
12
1. Applicable legal standards
33. The applicable legal standards are set out in Articles 14(1) and 57 of the ICSID
Convention and ICSID Arbitration Rule 6(2).
34. Article 14(1) of the Convention provides:
Persons designated to serve on the Panels shall be persons of high moral character
and recognized competence in the fields of law, commerce, industry or finance, who
may be relied upon to exercise independent judgment. Competence In the field of
law shall be of particular importance in the case of persons on the Panel of
Arbitrators.
35. Article 57 adds, in relevant part:
A party may propose to a Commission or Tribunal the disqualification of any of its
members on account of any fact indicating a manifest lack of the qualities required
by paragraph (1) of Article 14.
36. ICSID Arbitration Rule 6(2) sets out the form of the declaration currently required of
arbitrators who accept to serve on a tribunal.16 Sub‐paragraph (b) and the last sentence
of Arbitration Rule 6(2) were added as part of the amendment of the Arbitration Rules in
2006. The ICSID Working Paper which proposed this amendment states that its purpose
is to ‘expand the scope of disclosures of arbitrators to include any circumstance likely to
give rise to justifiable doubts as to the arbitrator’s reliability for independent
judgment’.17
37. The Two Members find themselves in general agreement with the approach to the
construction of Articles 14(1) and 57 of the Convention taken in Suez v Argentina:18
[T]he Spanish language version of the Convention Article 14(1) appears to be slightly
different from that of the English language version. The Spanish version of Article
14(1) refers to a person who “…inspira[r] plena confianza en su imparcialidad de
juicio. (i.e. who inspires full confidence in his impartiality of judgement.) Since the
treaty by its terms makes both language versions equally authentic, we will apply the
two standards of independence and impartiality in making our decisions. Such an
16 This form of words is that set out at [6] supra, including the words struck through by Professor Stern. 17 ICSID Working Paper “Suggested Changes to the ICSID Rules and Regulations” (May 12, 2005), 12. 18 Suez, Sociedad General de Aguas de Barcelona S.A. v Argentina (Decision on Proposal for
Disqualification) ICSID Case No ARB/03/17 (October 22, 2007), [28] – [30], citations omitted.
13
approach accords with that found in many arbitration rules which require arbitrators
to be both independent and impartial.
The concepts of independence and impartiality, though related, are often seen as
distinct, although the precise nature of the distinction is not always easy to grasp.
Generally speaking independence relates to the lack of relations with a party that
might influence an arbitrator’s decision. Impartiality, on the other hand, concerns
the absence of a bias or predisposition toward one of the parties. Thus Webster’s
Unabridged Dictionary defines ‘impartiality’ as “freedom from favoritism, not biased
in favor of one party more than another.” Thus it is possible in certain situations for
a judge or arbitrator to be independent of the parties but not impartial.
2. Relationship between disclosure and independence
38. The standard of disclosure under Arbitration Rule 6(2) and the standard under Article 57
of the Convention to determine whether there is a ‘manifest lack of the qualities
required’ under Article 14(1) are different.
39. The standard of ‘likely to give rise to justifiable doubts’, referred to in the ICSID
Secretariat Note on the new text of Arbitration Rule 6(2)(b),19 is taken from the standard
of disclosure required by the UNCITRAL Arbitration Rules, which is also the standard
applicable in those Rules to arbitration challenges.20 This standard is stricter than the
‘manifest lack of qualities’ of Article 57 of the ICSID Convention. Article 57 ‘imposes a
relatively heavy burden of proof on the party making the proposal’21 Thus, as it was put
in the Second Disqualification Proposal in the Suez case:22
It is important to emphasize that the language of Article 57 places a heavy burden
of proof … to establish facts that make it obvious and highly probable, not just
possible, that [the arbitrator] is a person who may not be relied upon to exercise
independent and impartial judgment.
19 Supra [32] & n 17. 20 Arts11(1) &12(1) UNCITRAL Arbitration Rules (2010 version). 21 Schreuer et al The ICSID Convention: A Commentary (2nd edn, 2009) , 1202, [57.19]. 22 Suez, Sociedad General de Aguas de Barcelona S.A. v Argentina (Decision on Second Proposal for Disqualification) ICSID Cases Nos ARB/03/17 and ARB/03/19 (May 12, 2008), [29], emphasis in original.
14
40. There is a clear distinction between the disclosure standards of Arbitration Rule 6(2) and
the disqualification dictates of Articles 14(1) and 57 of the ICSID Convention.
Reconciliation between these two standards is not to be achieved by simply imputing
the justifiable doubts standard into Articles 14(1) and 57 of the Convention.23 Thus, in
the view of the Two Members, non‐disclosure would itself indicate manifest lack of
impartiality only if the facts or circumstances surrounding such non‐disclosure are of
such gravity (whether alone or in combination with other factors) as to call into question
the ability of the arbitrator to exercise independent and impartial judgment.24
3. Relevance of the IBA Guidelines
41. The IBA Guidelines have been referred to extensively by the parties. Venezuela has
questioned their relevance in ICSID arbitrations, while Tidewater has pointed out that in
the introduction it is clearly stated that they are also intended for other arbitrations,
including investment arbitrations. As their title indicates, they are guidelines and not a
binding instrument. Nevertheless, it has been held by the ICSID Secretary‐General that,
though these guidelines have an indicative value only, they may furnish a useful
indication. 25 Arbitrators dealing with disqualification proposals have frequently been
guided by them.26
42. The Two Members do consider it useful to refer to the Guidelines for their indicative
value. But they must ultimately apply the legal standard laid down in the Convention
itself, and, in so doing, consider the Proposal for Disqualification in the context of the
facts of this particular case. They note in any event that the Explanatory Note to the
Guidelines states:27
These Guidelines are not legal provisions and do not override any applicable national
law or arbitral rules chosen by the parties….The Working Group trusts that the
Guidelines will be applied with robust common sense and without pedantic and
unduly formalistic interpretation.
43. These qualifications are important. The ICSID Convention mandates a general standard
for disqualification which differs from the ‘justifiable doubts’ test formulated in the IBA
23 Alpha Projektholding Gmbh v Ukraine, ICSID Case No. ARB/07/16, Decision on Challenge to Arbitrator (March 19, 2010), [64]. 24 The same view was taken in Alpha Projektholding ibid. 25 Participaciones Inversiones Portuarias supra n 11 [24]. 26 See, e.g., ICS supra n 5, [2]; Alpha Projektholding supra n 23, [56].
27 Supra n 3, 5, [6]
15
Guidelines.28 Further, and in any event, the circumstances relied upon in the Proposal
for Disqualification all fall within the ‘Orange List’ in the IBA Guidelines, to the extent
that they fall within the Guidelines at all. By contrast with the Red List, these are not
situations in which, depending upon the facts of a given case, an objective conflict of
interest exists. Rather, they are situations which the Working Group considered ought
to be disclosed, because they may give rise to an objective doubt as to the arbitrator’s
independence or impartiality. It added ‘non‐disclosure cannot make an arbitrator partial
or lacking independence; only the facts or circumstances that he or she did not disclose
can do so.’29 By the same token, ‘no presumption regarding disqualification should arise
from a disclosure.’30 The Working Group characterised the time limits set out in the
Orange List as ‘an appropriate general criterion, subject to the special circumstances of
any case.’31
44. With these observations in mind, it is now possible to consider in turn each of the
grounds on which Tidewater relies in its Proposal for Disqualification of Professor Stern,
dealing first with the effect of Professor Stern’s initial non‐disclosure.
B. Non‐disclosure of other ICSID arbitral appointments by the same party
45. In the first place, Tidewater contends that Professor Stern ought to have disclosed at the
outset the other cases in which Venezuela, its Attorney General or Curtis, had appointed
her as arbitrator. It submits that: ‘[i]f there is any doubt regarding the inferences to be
drawn from the common issues or the repeat appointments in question, the initial non‐
disclosure would be, in the words of one decision “sufficient in conjunction with the non‐
disclosed facts or circumstances to tip the balance in the direction” of disqualification.’32
46. The parties are not in agreement as to whether information in the public domain as to
an arbitrator’s appointments to other ICSID tribunals by the same party needs to be
disclosed. Arbitration Rule 6(2) does not limit disclosure to circumstances which would
not be known in the public domain. The wording of this rule is all encompassing without
distinguishing among categories of circumstances to be disclosed.
28 Ibid 7‐8. 29 Ibid, 18. 30 Idem. 31 Ibid 19.
32 Tidewater’s Further Observations, 11, citing Alpha Projektholding supra n 23, 11.
16
47. The question for the Two Members is whether the non‐disclosed circumstances,
whether alone or in combination with other elements, would justify reaching the
conclusion that Professor Stern manifestly lacked independence or impartiality. The
answer to this question will depend on a number of factors. The two arbitrators in the
Second Disqualification Proposal in the Suez cases listed the following factors to
structure their considerations: 33
[W]hether the failure to disclose was inadvertent or intentional, whether it was the
result of an honest exercise of discretion, whether the facts that were not disclosed
raised obvious questions about impartiality and independence, and whether the non‐
disclosure is an aberration on the part of the conscientious arbitrator or part of a
pattern of circumstances raising doubts as to impartiality. This balancing is for the
deciding authority…in each particular case.
Before considering these factors, several issues of fact and law on which the parties
disagree need to be addressed.
48. First, should or should not the appointment of Professor Stern as arbitrator in the case
of Vannessa be included as one of the appointments in considering the number of
multiple appointments by a single party? The fact that the IBA Guidelines are just
guidelines would favour a flexible interpretation of the time limits – as argued by
Tidewater and foreseen in the Guidelines themselves. Therefore, an appointment
accepted shortly after the cut‐off period of three years, leading to the constitution of the
tribunal within the three year period in a case which is still pending should be included
in considering the number of multiple subsequent appointments.
49. Second, should the Attorney General of Venezuela be considered as counsel or as party
for the purposes of applying the IBA Guidelines? The Attorney General is by law the sole
and exclusive representative of Venezuela in legal proceedings.34 The office of the
Attorney‐General should therefore be considered an officer of the State of Venezuela.
Adopting a ‘robust common sense’ interpretation of the IBA Guidelines, the Two
Members are in no doubt that, in considering multiple appointments by the same
counsel for the purpose of Section 3.3.7, it would not be right to require a separate
33 Supra n 22, [44], citing Baker & Davis The UNCITRAL Arbitration Rules in Practice: the Experience of the Iran‐US Claims Tribunal. (1992) 50. 34 Art.247 Constitution of the Bolivarian Republic of Venezuela; Art. 2 Decreto con Rango, Valor y
Fuerza de Ley de Reforma Parcial del Decreto con Fuerza de Ley Orgánica de la Procuraduría General de la República, cited in Venezuela’s Reply Observations, 4.
17
disclosure of multiple appointments by the Attorney General. The purpose of Section
3.3.7 is to require an arbitrator to disclose cases of excessive patronage by the same
counsel or law firm, which may give rise to a concern that a relationship of dependence
has arisen which may affect the arbitrator’s independence or impartiality. In the case of
a State, which is required by law to act through its Attorney General, no additional
dependence could be said to arise simply because the arbitrator’s appointment was
made formally through the Attorney General’s office.
50. As a result of the clarification made by Professor Stern, this case was, at the time of her
appointment, only the second time she had been appointed as arbitrator by the outside
counsel appointed by Venezuela in this matter, Curtis – the other being Brandes.35 Thus,
no further consideration need be given to disclosure of multiple appointments by the
same counsel on the facts of this case.
51. This leaves only the non‐disclosure of the circumstance that, at the time of Professor
Stern’s first declaration, the appointment as arbitrator in this case was the third
appointment by Venezuela. The Two Members consider that, as a general rule,
arbitrators appointed to ICSID tribunals ought to disclose appointments to other arbitral
tribunals by one of the parties or an affiliate within the previous three years. Even in the
case of investment arbitration, not all of these appointments will necessarily be in the
public domain, and they may require consideration in assessing the arbitrator’s
independence and impartiality. The Two Members agree with Tidewater that in general,
in considering the scope of her duty of disclosure, the arbitrator may not count on the
due diligence of the parties’ counsel. As pointed out by Tidewater, arbitrators will
always be in ‘the best position to gather, evaluate, and disclose accurate information
relevant to their potential conflicts’.
52. However, one of the distinctive aspects of ICSID arbitration (as compared with the
procedures commonly applied in other types of commercial and investment arbitration)
is the transparency of the arbitral process. Regulation 22(1) of the ICSID Administrative
and Financial Regulations provides:
The Secretary‐General shall appropriately publish information about the operation of
the Centre, including the registration of all requests for conciliation or arbitration
and in due course an indication of the date and method of the termination of each
proceeding.
35 Professor Stern’s Explanation, 2.
18
53. Further, Regulation 23 provides for the maintenance of Registers, inter alia, for requests
for arbitration:
(1) The Secretary‐General shall maintain, in accordance with rules to be promulgated
by him, separate Registers for requests for conciliation and requests for arbitration.
In these he shall enter all significant data concerning the institution, conduct and
disposition of each proceeding, including in particular the method of constitution and
the membership of each Commission, Tribunal and Committee. On the Arbitration
Register he shall also enter, with respect to each award, all significant data
concerning any request for the supplementation, rectification, interpretation,
revision or annulment of the award, and any stay of enforcement.
(2) The Registers shall be open for inspection by any person. The Secretary‐General
shall promulgate rules concerning access to the Registers, and a schedule of charges
for the provision of certified and uncertified extracts therefrom.
54. As a matter of practice, details of all appointments to arbitral tribunals are published on
the ICSID website, icsid.worldbank.org, once the relevant tribunal has been constituted,
along with the dates and development of other procedural details of each case. Thus, in
the present case, the fact of Professor Stern’s appointment in each of Vannessa and
Brandes was readily accessible on the ICSID website. It is correct that, as pointed out by
Tidewater, the website does not explicitly show who appointed each arbitrator. But the
name of the appointing party in each case is available for inspection on the ICSID
Register of Requests for Arbitration. While the Two Members consider that an
arbitrator’s disclosure statement ought to include even publicly available arbitral
appointments, in the case of ICSID appointments, this must be out of an abundance of
caution, given the ready accessibility of this information in the records of the very
Centre with which the parties are dealing. In any event, the Two Members consider that
the fact that this information is publicly available can and should be taken into account
by them in determining the separate question of whether that non‐disclosure may itself
amount to a manifest lack of independence or impartiality.
55. Returning to the list of factors identified in Suez,36 the Two Members consider that
Professor Stern‘s failure to disclose was an honest exercise of judgment on her part in
the belief that publicly available information did not require specific disclosure. How
36 Supra [47].
19
could it be said that she was intent on hiding the circumstances surrounding her
appointments if those are publicly available on the Register of ICSID itself? It has been
Professor Stern’s practice in other similar situations without her independence or
impartiality being questioned by counsel. 37
56. Thus, in the view of the Two Members, no adverse inference can be drawn from her
deletion of the two paragraphs from her Declaration. When this deletion was queried by
Tidewater, Professor Stern immediately filed a supplementary explanation with her
revised Declaration dated September 13, 2010. In that statement, she disclosed all
three of her other arbitral appointments by Venezuela.
57. The Two Members therefore conclude that the non‐disclosure at the time of the first
declaration of two previous appointments by Venezuela which are in the public domain
is not sufficient to sustain a finding that Professor Stern manifestly lacks the qualities
required under Article 14(1) of the ICSID Convention.
C. Multiple arbitral appointments
58. Beyond the issue of non‐disclosure, the next question is whether the existence of
multiple appointments by the same party would itself lead an objective observer to
conclude that the Article 57 standard has been breached. In addition to Vannessa and
Brandes, Professor Stern has again been appointed by the same party and the same
counsel to another arbitral tribunal, in the case Universal Compression, as disclosed in
her Second Declaration.
59. The Two Members begin their analysis of this question by observing that the question
whether multiple appointments to arbitral tribunals may impugn the independence or
impartiality of an arbitrator is a matter of substance, not of mere mathematical
calculation. Whilst it is useful to have the guidance provided by Section 3.1.3 of the IBA
Guidelines, this can be no more than a rule of thumb. Depending on the particular
circumstances of the case, either fewer or more appointments might, in combination
with other factors, be needed to call into question an arbitrator’s impartiality. There is
perforce an arbitrary character about the limitation to two appointments within three
years. Moreover, it is inherent in such a guideline that more than one appointment by
the same party is not necessarily suggestive of a conflict.
37 Professor Stern’s Explanation, 3.
20
60. Considering the matter as one of principle, the conflict which may potentially arise from
multiple arbitral appointments by the same party is of a different character from other
connections to one of the parties, including service as counsel or other professional
capacity.38 The starting‐point is that multiple appointments as arbitrator by the same
party in unrelated cases are neutral, since in each case the arbitrator exercises the same
independent arbitral function. As Craig, Park and Paulsson observe:39
A challenge will not ordinarily succeed simply because an arbitrator has served in the
same capacity in prior proceedings involving one of the parties. Such a claim for
recusal would not lie against a judge, and it is hard to see why the rule should be
different in arbitral proceedings.
61. Repeat appointments may be as much the result of the arbitrator’s independence and
impartiality as an indication of justifiable doubts about it.40 This is reflected in the fact
that national courts called upon to consider proposals for disqualification on such a
ground normally reject them in the absence of aggravating circumstances.41
62. In the view of the Two Members, there would be a rationale for the potential conflict of
interest which may arise from multiple arbitral appointments by the same party if either
(a) the prospect of continued and regular appointment, with the attendant financial
benefits, might create a relationship of dependence or otherwise influence the
arbitrator’s judgment; or (b) there is a material risk that the arbitrator may be influenced
by factors outside the record in the case as a result of his or her knowledge derived from
other cases. 42 The Two Members deal with factor (b) in Section D infra. In the
remainder of this Section, they deal with whether, on the facts of this case, it can be said
that the three appointments of Professor Stern by Venezuela ipso facto call into
question her independence or impartiality.
63. Such practice within ICSID as is publicly available supports a cautious approach to a
finding of disqualification on this ground. There have been a number of recent
38 Connections as counsel to one of the parties (or to a third party with a right of intervention) were a material factor in a number of the recent reported investment cases where a proposal for disqualification was upheld, e.g., ICS supra n 5 ; Gallo v. Canada, PCA, Decision on Challenge to Arbitrator (October 14, 2009) ; Ghana v Telecom Malaysia Bhd (Dist Ct The Hague, October 18, 2004). 39 Craig, Park & Paulsson International Chamber of Commerce Arbitration (3rd edn, 2001), 231, [13.05]. 40 Born International Commercial Arbitration (2009) 1524. 41 The American authorities are cited in Born ibid 1525, nn 856 & 857; and on the French practice to like effect see Poudret & Besson Comparative Law of International Arbitration (2nd edn, trans Berti & Ponti, 2007), [421]. 42 See Craig, Park & Paulsson supra n 39, idem.
21
unsuccessful challenges to arbitrators in investment arbitration cases on this ground,
both within and outside the ICSID system in which the results are known, but the
decision is not fully reported.43 In one case, where the reasoning only is excerpted, the
two arbitrators concluded that the mere fact that an arbitrator sat in two different cases
brought against the same respondent State did not warrant disqualification ‘absent any
other objective circumstances demonstrating that these two cases are related in such a
manner that the arbitrator’s determination in one case would manifestly affect the
challenged arbitrator’s reliability to exercise independent judgment in the other case.’44
So, too, in the course of a Decision on Jurisdiction in an UNCITRAL case, the Tribunal,
observing that the Respondent State had chosen the same arbitrator in two cases, held
that ‘the fact of holding a joint appointment would not, in and of itself, be grounds for a
challenge.’45
64. In the view of the Two Members, the mere fact of holding three other arbitral
appointments by the same party does not, without more, indicate a manifest lack of
independence or impartiality on the part of Professor Stern. Indeed, the Two Members
find no basis to infer that Professor Stern would be influenced in her decision in any way
by the fact of such multiple appointments by one party. On the contrary, her conduct
has been demonstrably independent of such influence. The Two Members take notice
from the Register of Cases publicly maintained by ICSID on its website that Professor
Stern has held or currently holds arbitral appointments in many ICSID cases and so
cannot be said to be dependent on any one party for her extensive practice as an
arbitrator in investment cases. Moreover, in each of the two cases in which she was
appointed by Venezuela, and where she has to date rendered decisions, Vannessa and
Brandes, Professor Stern has joined unanimous preliminary decisions rejecting
applications made by Venezuela.46 This fact tends to indicate that Professor Stern has
been appointed on subsequent occasions because of her independence, rather than the
reverse. Thus, the Two Members conclude that the appointment of Professor Stern on
two prior occasions by Venezuela does not demonstrate a manifest lack on her part of
43 See the references in Sheppard “Arbitrator independence in ICSID arbitration” in Binder (ed) International Investment Law for the 21st Century. Essays in honour of Christopher Schreuer (2009) 131, 154‐5; and Ziadé “Recent developments at ICSID” (2008) 25 No 2 News from ICSID 3, 4‐5. One such Proposal concerned Professor Stern: Electrabel SA v Hungary supra n 11. 44 Ziadé idem. 45 Encana Corp v Ecuador (Partial Award on Jurisdiction) UNCITRAL (February 27, 2004), [43]. 46 Vannessa (Decision on Jurisdiction) (August 22, 2008); Brandes (Decision on Preliminary Objection) (February 2, 2009), both available at: http://ita.law.uvic.ca/alphabetical_list.htm, and referred to in Venezuela’s Observations, 2.
22
the quality of independent and impartial judgment required of an arbitrator under the
ICSID Convention.
D. Possibility of decision on related legal issues
65. It remains finally to consider whether this conclusion is affected by the additional factor,
raised in Tidewater’s Further Observations, that one of the prior cases, Brandes, may
raise a related issue of law, namely the question whether the Venezuelan Law on the
Promotion and Protection of Investments expresses a basis for Venezuela’s consent to
ICSID arbitration .47 This, claims Tidewater, invokes Section 3.1.5 of the IBA Guidelines as
Professor Stern is currently serving as ‘arbitrator in another arbitration on a related issue
involving one of the parties or an affiliate of one of the parties.’
66. Tidewater does not allege that there is an overlap in the underlying facts between
Brandes and the present case, so that Professor Stern would benefit from knowledge of
facts on the record in Brandes which may not be available in the present case.48 Rather,
it alleges a lack of impartiality based upon an overlap between the issues of law raised in
the two cases. Specifically, it states, based upon a news report filed with Venezuela’s
observations,49 that, in Brandes, the sole basis for invoking ICSID jurisdiction is the
Venezuelan law. It states that some of Tidewater’s claims in the present arbitration also
rely upon that law as the basis for ICSID jurisdiction, and that ‘[i]t is public knowledge
that the Republic of Venezuela takes the position that the Investment Law does not
express consent to ICSID jurisdiction.’50 Since the Brandes Tribunal will have to rule on its
jurisdiction first, Tidewater claims that ruling ‘will amount to prejudging the identical
issue presented in this case, without the Claimants having an opportunity to argue the
issue before Professor Stern has made up her mind.’51 Venezuela observes that a similar
argument has been rejected in other recent ICSID cases.52
67. In the opinion of the Two Members, the rationale behind the potential for the conflict of
interest identified in Section 3.1.5 relates to cases where, by reason of the close
interrelationship between the facts and the parties in the two cases, the arbitrator has in
47 Supra [18]. 48 An issue which could give rise to a problem of procedural equality discussed in Encana supra n 45, [44] ‐ [45]. 49 Supra n 10. 50 Tidewater’s Further Observations, 5. 51 Ibid 6.
52 Venezuela’s Observations, 5.
23
effect prejudged the liability of one of the parties in the context of the specific factual
matrix. They agree with the formulation of the French court, cited with approval in
Poudret and Besson, that there is ‘neither bias not partiality where the arbitrator is
called upon to decide circumstances of fact close to those examined previously, but
between different parties, and even less so when he is called upon to determine a
question of law upon which he has previously made a decision.’53
68. The Two Members note that this view has also been adopted in decisions on recent
proposals for disqualification within ICSID, in which the outcome and some of the
reasons are available on the public record, but the full text of which is available neither
publicly nor to the Two Members. 54 The Two Members agree with the observation
made in one such case, and reported in an official ICSID publication, that: ‘[i]nvestment
and even commercial arbitration would become unworkable if an arbitrator were
automatically disqualified on the ground only that he or she was exposed to similar legal
or factual issues in concurrent or consecutive arbitrations. 55
69. Neither Professor Stern, still less the present Tribunal as a whole, will be bound in the
present case by any finding which the Brandes Tribunal may arrive at as to the issue of
Venezuelan law referred to. Indeed, at this stage in the present proceeding, it would be
premature to make any judgment as to what issues of law may be pleaded by the parties
(and thus as to the similarities or differences between the context for the issues of law
to be determined in the two cases), since no pleadings other than the Request for
Arbitration have yet been filed.
70. The Two Members do not consider in this regard that there is a material difference
between prior consideration of issues of international law and issues of host state law
which may arise in for determination in the course of the proceedings. Thus, the Two
Members do not accept the distinction drawn by Tidewater in its Further Observations
between issues of international law as being ‘generically similar and recurrent in
53 Paris, Ben Nasser, Rev arb 1994, 380 note Bellet, cited in Poudret & Besson supra n 41 idem. 54 Two of the decisions, noted in the sources at supra n 43, are Electrabel SA v Hungary and Saba Fakes v Turkey supra n 11. 55 Ziadé supra n 43, 5; and, to like effect, Suez n 18, [36]; Urbaser SA and other v Argentina (Decision on Disqualification of Arbitrator) ICSID Case No ARB/07/26 (August 12, 2010), [47] – [48]. In Republic of Argentina v BG Group plc Civ Action No 08‐485 (US DC, June 7, 2010), the Court heard a motion to vacate an investment arbitration award rendered under UNCITRAL Rules, inter alia on the ground that one of the arbitrators lacked impartiality because he had sat on four cases under the same Bilateral Investment Treaty each raising the “state of necessity” doctrine and reached different decisions in each. The Respondent State claimed that the inconsistent decisions were evidence of bias. The Court dismissed this argument, and the motion as a whole. It noted (at 21) that ‘there could be a number of innocuous reasons to explain why [the arbitrator] reached a different conclusion.’
24
investment arbitration’ and issues of host state law.56 In the case of each, the Tribunal is
legally bound to arrive at its decision according to the applicable law as it finds it to be.
In determining its jurisdiction, the Tribunal is bound by Article 25 of the ICSID
Convention to determine whether ‘the parties to the dispute consent in writing to submit
to the Centre.’ In determining the merits of the dispute, the Tribunal is bound by Article
42 of the ICSID Convention to ‘decide a dispute in accordance with such rules of law as
may be agreed between the parties. In the absence of such agreement, the Tribunal shall
apply the law of the Contracting State party to the dispute (including its rules on the
conflict of laws) and such rules of international law as may be applicable.’
71. So far as concerns Professor Stern’s position, the Two Members have no reason to doubt
Professor Stern’s statement that ‘the fact of whether I am convinced or not convinced by
a pleading depends upon the intrinsic value of the legal arguments and not on the
number of times I hear the pleading.’57
72. Accordingly, the Two Members find that this third ground upon which Tidewater’s
Proposal for Disqualification is premised is not well founded and must be rejected.
V. Decision
73. For the reasons given above, the Two Members decide that:
(1) Tidewater’s Proposal to disqualify Professor Brigitte Stern as Arbitrator and
member of this Tribunal is dismissed.
(2) The determination and attribution of costs in connection with this Decision is
reserved to a later stage of this proceeding.
(3) As from the date hereof, the suspension of the proceeding according to Arbitration
Rule 9(6) is terminated.
56 Supra n 8.
57 Professor Stern’s Explanation, 2.
j
Professor Campbell McLachlan QC Dr Andres Rigo Sureda
President Arbitrator
Date: V~c~n£t::c- {g I .;Zo{O Date: ~~c~/;~r .22,20/0
